USD/TRY climbs to multi-day highs near 13.70

The Turkish lira depreciates further and pushes USD/TRY to fresh multi-session peaks near 13.70 on Tuesday.

USD/TRY maintains its consolidation well in place

USD/TRY challenges the upper end of the range prevailing since mid-January around 13.70 amidst the firmer note in the US dollar and the persistent decline in yields of the Turkey 10y bond.

On the latter, yields navigate the area of monthly lows around 21.50% after climbing as high as the 22.40% zone at the beginning of February.

The lira, in the meantime, seems to have exacerbated the decline after inflation figures rose to 48.69% in the year to January, the highest level in the last 20 years.

On another front, the Turkish Current Account deficit is seen at around $15B in 2021 according to a Reuters poll released on Monday. The result, however, is lower than the government’s $21B estimated.

In the meantime, the meeting between finmin N.Nebati and investors in London appears to have yielded a positive outcome. At the meeting, the unorthodox Turkish economic policy and a planned bond sale took centre stage amidst recent data suggesting that Turkey’s FX reserves rose by $5-6B during last week. Nebati also suggested that the rise in inflation in the country follows reasons that foreigners cannot understand culturally. (wait… what?)

What to look for around TRY

The pair keeps the multi-session consolidative theme well in place, always within the 13.00-14.00 range. While skepticism keeps running high over the effectiveness of the ongoing scheme to promote the de-dollarization of the economy – thus supporting the inflows into the lira - the reluctance of the CBRT to change the (collision?) course and the omnipresent political pressure to favour lower interest rates in the current context of rampant inflation and (very) negative real interest rates are a sure recipe to keep the domestic currency under pressure for the time being.

Key events in Turkey this week: Unemployment Rate (Thursday) - End Year CPI Forecast, Current Account, Industrial Production, Retail Sales (Friday).

Eminent issues on the back boiler: Progress (or lack of it) of the government’s new scheme oriented to support the lira via protected time deposits. Constant government pressure on the CBRT vs. bank’s credibility/independence. Bouts of geopolitical concerns. Much-needed structural reforms. Growth outlook vs. progress of the coronavirus pandemic. Earlier Presidential/Parliamentary elections?

USD/TRY key levels

So far, the pair is advancing 0.44% at 13.6296 and a drop below 13.3226 (55-day SMA) would expose 13.2327 (monthly low Feb.1) and finally 12.7523 (2022 low Jan.3). On the other hand, the next up barrier lines up at 13.9319 (2022 high Jan.10) followed by 18.2582 (all-time high Dec.20) and then 19.0000 (round level).